Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/184795
Authors: 
Ferreira, Daniel
Nikolowa, Radoslawa
Year of Publication: 
2018
Series/Report no.: 
Working Paper 844
Abstract: 
Profit-maximizing firms should fill job positions at the lowest possible cost. Because employees may have preferences over the attributes of their jobs, we can view this problem as one of finding the optimal way to sell job attributes to potential employees. In this paper, we characterize the optimal mechanism by which a firm can sell jobs with desirable attributes. This mechanism is implemented by offering employees a long-term employment contract in which firms create a number of low-quality job positions and offer them to young employees, while only a subset of these employees are promoted to a desirable job. In contrast to the traditional compensating differentials framework, job desirability and wages are positively related in the optimal contract. Our analysis provides a novel framework for thinking about a number of phenomena, such as the span of control, inequality within and between generations, and the effect of competition on employment and wages.
Subjects: 
Employment Contracts
Compensating Differentials
Promotions
Job Design
Span of Control
JEL: 
M51
J31
L22
Document Type: 
Working Paper
Social Media Mentions:

Files in This Item:
File
Size
549.23 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.